SBIR at the National Science Foundation (2015) / Chapter Skim
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7 Findings and Recommendations
7 Findings and Recommendations
Pages 175-200
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Stimulate technological innovation; (2) use small business to meet Federal R/R&D needs; (3)
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• Sales Anticipated: An additional 19 percent of Phase II respondents reported that they anticipate future sales.5 • Scale of Commercialization: Despite the high rates of commer cialization, the scale of commercialization was limited: no rojects p surveyed reported aggregate sales of $50 million or more, and only 6 projects (out of 114) reported project-related sales of $10-50 million.6 B. Academies survey data show that NSF SBIR projects are primarily commercializing in the domestic private sector.
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With respect to direct job growth, Academies survey data indicate that the median size of firms with NSF Phase II awards grew from 6 employees at the time of award to 10 em ployees at the time of survey.12 E SBIR funding makes an important difference to project outcomes.
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18 See Figure 3-10 for percentages of SBIR Phase I awards going to MOSB, and Figure 3-24 for percentages of SBIR Phase II awards going to MOSB. 19 See Figure 3-8 for Phase I MOSB comparative success rates for applications receiving awards, and Figure 3-22 for Phase II MOSB comparative success rates.
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24 See Table 2-10. 25 discussion of conclusion about woman and minority participation and NSF's limited efforts A to address the issue is provided in more detail in Chapter 2, "Conclusions: Woman and Minority Participation in the NSF SBIR Program."
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Survey data indicate that NSF SBIR projects continue to utilize universities in a variety of ways (excluding the even closer connection through Small Business Technol ogy Transfer [STTR]
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• Project Partners: 114 different universities were identified by survey respondents as project partners; 13 were mentioned by more than 3 respondents.29 • Academic Founders: More than 80 percent of NSF Phase II SBIR companies responding to the survey reported at least one academic founder, and about a quarter reported that the most recent prior employment of the founder was at a university.30 C. Academies survey data show that SBIR projects generate substan tial knowledge-based outputs such as patents and peer reviewed publications. • Patents: Patenting remains an important component of knowledge diffusion (and protection)
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• 45 percent of Phase II respondents to the Academies survey said that the company was founded entirely or in part because of the SBIR program.35 • For some companies included among the case studies, SBIR funding permitted the shift from an exploratory to a professional operation.36 B. De-risking subsequent investment and new markets • Mitigating Risks: One important impact of the NSF SBIR program is to provide funding that reduces the risk for subsequent inves tors. Risk mitigation often leads to the leveraging of SBIR funding while retaining the power of markets to make final decisions about funding.37 • Matching Funds: The NSF Phase IIB program lowers risks by pro viding matching funds to companies with external investors or other approved sources of funding.38 • Early Stage: More widely, many respondents to the Academies survey and a number of case study interviewees said that NSF SBIR funding was provided at a stage when the project was sim 34 See Appendix E: Touch Graphics Case Study.
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• 35 percent of Phase II winning recipients indicated that the NSF SBIR program had a "transformative" effect on their company. Another 54 percent said that it had a "substantial positive long-term effect."44 • Of the 179 detailed comments received in the Academies survey, none reported negative effects.
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• C reated new companies and kept companies in business (that would not exist without SBIR funding)
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In part, this reflects the rigorous selection process -- NSF selects Phase IIB projects specifically for their commercial potential, so improved commercial 46 Previous Academies studies discussed the question of multiple SBIR awards to companies. The 2009 report concluded that "mills" are not a significant problem.
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Respondents to the Phase IIB survey reported employment growth from a median of 8 employees at the time of the award to 17 at the time of the survey.61 • More opportunities for female principal investigators. Phase IIB respondents reported more female principal investigators than Phase II projects -- 18 percent versus 7 percent.62 C. The Academies survey of Phase IIB projects reports that by requir ing matching funds, the Phase IIB program provides incentives for firms to acquire additional investment.
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o Thirty percent of Phase IIB projects reported that that their Phase IIB matching funding came from a new financial partner or investor.67 o While sales were the single largest source of matching funds, three quarters of responses indicated that funds were acquired from financial, technical, or commercial partners with whom they had a long-term relationship.68 o Sixty-one percent of respondents indicated that the new fund ing would not have been acquired without Phase IIB.69 • Providing Direct Incentives for Firms: Phase IIB provides direct incentives for firms, and imposes reasonable administrative burdens. o More than half of Phase IIB respondents indicated that the Phase IIB program provided a substantial incentive for or drove the process for seeking external funding.70 o Forty-one percent of projects reported the total effort required to apply for Phase IIB as "no additional effort needed except 63 There were no statistically significant differences between survey responses from Phase IIB respondents and agency data from the NSF awards database.
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The study draws attention to potential areas of improvement for the Phase IIB program. These include the following: • Confusion about matching funds criteria.
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While the commercial focus of the NSF SBIR program is widely appreciated by survey respondents and interviewees (as reflected in comments in Chapter 6 and Appendix E) a number of respondents to the Phase IIB survey suggested that NSF should review the balance between rapid commercialization and powerful innovation, as the current balance might end up ex cluding potentially important projects.
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, seeks to ensure that some key steps in the development of a sustainable company are taken at an early stage in the product development cycle.83 • The Innovation Accelerator, a private organization partnering with NSF to facilitate the commercialization efforts of high-technology small businesses funded by grants from the NSF SBIR program, is also potentially valuable, although its reach may have to be ex panded beyond the information technology sector. C. Key Concerns • Data Tracking, Management, and Use: There are broad challenges in tracking commercialization, at both the company and project levels.
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• Need for Additional Tools: Additional data collection tools that reflect the changing information environment have not been de ployed -- NSF does not use additional methods of data collection beyond the flow of awards and applications data and the annual telephone survey.84 Provisions of a web-based survey tool for use by companies periodically to update their progress metrics may facilitate company reporting with reduced burden. • Need for a Broader Focus: The focus of outcomes data collection is almost entirely on commercialization that, as a result, misses op portunities to provide detailed feedback about program operations as well as other congressionally-mandated outcomes.
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On the other hand, public R&D programs have traditionally encouraged companies to participate and have developed review strategies for dealing with the larger numbers and varied quality of proposals that invariably result. RECOMMENDATIONS While the NSF SBIR program generates substantially positive outcomes, the committee has identified a series of recommendations to improve its processes and outcomes.
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These benchmarks should be shared with other SBIR agencies. Benchmarks should address key questions that would include the following metrics, all of which should include both absolute levels and trends over time: o Shares of applications from companies owned by women and minorities o Shares of applications with woman and minority principal investigators o Shares of Phase I awards to companies owned by women and minorities o Shares of Phase I awards with woman and minority principal investigators o Shares of Phase II awards to companies owned by women and minorities o Shares of Phase II awards with woman and minority principal investigators o Shares of Phase IIB awards to woman and minority owned firms o Shares of Phase IIB awards with woman and minority principal investigators • Track Related Program Operations: Metrics should also track re lated program operations including outreach efforts.
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II. Commercialization The NSF SBIR program is tightly focused on commercialization that is based on a venture capital model. However, it is worth considering some possible adjustments to the current approach.
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E. Matching funds requirements.94 • Explore use of In-Kind Contributions: NSF may wish to explore allowing the limited use of some specified in-kind contributions as part or all of the matching funds. Nearly half of survey respondents agreed.
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• Manage Information: o NSF should explore the development of an integrated informa tion management system to improve the management of its SBIR program. o NSF is now developing a database of Phase IIB projects for which it is to be commended.
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This knowledge is currently not systematically included in internal program evaluation by NSF's SBIR program. • Develop Feedback Tools: NSF should develop pathways to provide ongoing feedback from companies about program activities and operations.
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For example, systemati cally tracking woman and minority participation would have sur faced the issue of differential Phase I and Phase II success rates identified earlier. D. Annual Report to the National Science Board and Congress: The SBIR/STTR program should provide a comprehensive annual report to the National Science Board and Congress and the public on its opera tions.
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• Summary conclusions, including prospective views on program activities and improvements for the coming year. While caution should be employed when imposing new reporting bur dens on the NSF SBIR program, implementation of an improved infor mation management system would provide a cost- and time-effective basis on which to provide better reporting on the program.
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Screening out more weak proposals before application would raise success rates for the remaining applications, while maintaining or even improving the quality of the awardees. C. NSF should consider the adoption of further mechanisms to reduce funding gaps between Phase I and Phase II.102 Some of the mechanisms used at other agencies include a Fast Track process for merging Phase I/Phase II applications; use of agency options as bridge funding; early identification of projects that are likely to be funded.
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